Tencent and NetEase Experience Growth as Licensing Restrictions Ease

China’s major gaming companies, Tencent and NetEase, are seeing a resurgence in their business as the government eases its licensing freeze and legislative restrictions.

NetEase’s title, Eggy Party, which was launched in May 2022, has become one of the company’s biggest titles. With 30 million daily active users, Eggy Party, a battle royale game similar to Fall Guys, contributed to an 8% increase in NetEase’s sales in the January-March period, reaching $2.8 billion.

Tencent also experienced a sales boost of 11% to $6.7 billion, largely due to the success of their mega-hit game, Honor of Kings. Notably, sales in China, which account for 70% of Tencent’s total sales, increased for the first time this year after five consecutive quarters of decline.

However, it’s important to maintain caution. While the Chinese game market is projected to reach $57 billion by 2027, companies are now looking to diversify their portfolios beyond China due to the impact of the Covid pandemic and the desire to tap into less restricted audiences abroad.

Tencent’s senior vice president, Steven Ma, has expressed the company’s goal to generate more than half of its income from overseas games in the future. Currently, Tencent’s overseas sales account for 10% of its total revenue, while NetEase’s overseas sales make up 30%. Tencent aims to increase its overseas income to 40%.

Furthermore, China’s stumble has allowed other markets, particularly its main competitor India, to catch up. Despite the challenges, China’s gaming industry is in a better position than it has been in months. However, the speed of the recovery and whether China will regain its position as the leading gaming market is yet to be determined.